India steel index slips further w-o-w, longs marginally on backfoot

• Longs see price drops in post-restocking lull
  
  
• Flats wait for post-election demand rebound
  
  
• Prices may remain range-bound in short term
  
  

Morning Brief: After six weeks of a more or less positive run, the BigMint India Steel Composite Index slid into negative zone and has stayed there for two consecutive weeks now. It dipped a further 0.2% to 145.6 points for the week ended 24 May, 2024 compared to the previous closing of 145.9.

However, the index is still hovering at a six-month high as this level had been last seen on 17 November 2023.

Longs are now on a stickier wicket, slipping marginally w-o-w while flats remained stable.

Factors that impacted the index last week

BF rebar prices dip in dull market: Trade-level rebar prices overall dropped by INR 300/tonne ($4/t) - although the trend was mixed, with some markets remaining stable while others fell w-o-w. Prices hovered at 58,400/t ($703/t).

Project segment prices have remained stable at INR 57,500-58,000/t ($692-698/t) for three weeks in a row now.

Longs, after four weeks of a good run, are now feeling the heat of receded demand post a pre-election restocking spree.

Buying interest was low in the market. Inventories were also low since mills had previously taken maintenance shutdowns to cut production amid the restocking seen late last fiscal and in April.

IF rebar stable but raw materials volatile: Induction furnace (IF)-route rebars remained stable w-o-w at INR 53,200/t ($641/t). IF rebars too were challenged by weak demand. Billets and sponge iron, two key raw materials, were somewhat volatile last week amid tight supplies. This made buyers uncertain of price directions, which further kept them away from the market. Sellers offers discounts to lure buyers but procurements were weak overall.

Trade-level HRCs flat, CRCs decline in dull market: In flats, hot rolled (HR) and cold rolled (CR) coil prices remained range-bound last week amid low demand even though supply was tight. Benchmark HRCs rose by a mere INR 100/t ($1/t) to INR 54,000/t ($650/t) but CRCs dropped by INR 500/t ($6/t) to INR 60,800/t ($732/t).

There had been some flicker of interest in some markets where elections have concluded, possibly on the back of pent-up demand and funds release.

Exports still a damp squib: Flat steels were further affected by the continued slackness in export demand. Mills withheld their offers to the Middle East and Vietnamese markets for yet another week even as Chinese offers to the former rose by $5-10/t while those for Vietnam were range-bound. Indian mills preferred to sustain their focus on the domestic market since export offers were still unviable for them.

Outlook

Since the price gap between the IF and BF rebars is still high, the former may remain range-bound but the latter may see some price drops in the short term amid dull demand and approaching monsoons.

In flats, prices may also remain range-bound till the elections are over and political stability returns from early-June.

India Steel Composite Index

The India Steel Composite Index is assessed on a weekly basis, every Friday at 18:30 IST, as per the weighted average prices based on manufacturing capacity and production.

BigMint considers the Composite Index with the base year being 3 January 2020 (financial year 2019-2020) and the base value as 100. The Composite Index does not give the absolute price but a trend of the market. The Indian steel industry is broadly classified into the BF-BOF and the electric/induction furnace routes. Keeping this broad classification in view, BigMint proposes to release the Composite Index by considering both production routes by manufacturing capacity and the production weighted method to compute the index for India.